Gary Gensler is aiming to boost competition for orders and improve deals for retail investors,
Wall Street’s regulator is about to announce rule changes that would force trading firms to directly compete to execute trades from retail investors in a bid to boost competition for orders and improve deals for retail investors, according to four industry sources.
The proposal will include an SEC definition of “best execution” requirements that would force retail brokers to send their customers’ orders to auctions, run by exchanges or off-exchange trading venues, which would allow market participants to compete to trade against the orders, the sources said.Currently, retail brokerages can send customer orders directly to a wholesale broker to be executed, as long as the broker is matching or bettering the best price available on U.S. exchanges.
Gensler is expected to lay out this agenda in a Wednesday speech, which will also detail more potential rule changes, including reducing trading size increments on exchanges to allow them to better compete with off-exchange trading venues, according to the sources. The moves could lead to the biggest shake-up of U.S. equity market rules in over a decade by fundamentally altering the business model of wholesalers, which can make more money by executing retail investor orders internally than they do on public exchanges, where they might find themselves trading with other sophisticated trading firms or institutional investors.
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